Although there are still many unknowns with regard to tax reform, we do know that not every charitable organization will be affected in the same way.
Having comprehensive knowledge of one’s donor base is especially critical in 2018. The update in tax policy and the impressive performance of the stock market in 2017 (currently expected to continue into 2018) may impact individual donor demographics quite differently.
Focusing on the fundamental principles of fundraising remains as important as ever. The field still has work to do when it comes to donor knowledge and retention: over the last five years, donor retention rates have consistently been weak—averaging below 50%.91 This figure underscores the importance of building long-term relationships with donors by understanding donors’ personal characteristics and motivations for giving.
The new landscape requires a donor-focused fundraising approach that is sensitive both to the changes in tax policy from a donor perspective and in diversifying funding streams from a nonprofit organization perspective. Additional developments in the giving environment that have facilitated donor-centric behavior are outlined in the following section. Understanding what drives recent giving patterns can help nonprofit organizations of all types cultivate strong relationships with donors and proactively plan for the years ahead.
Employee Choice Driving Corporate Philanthropy
In recent years, corporations and their philanthropic arms have begun to recognize the benefits of focusing on the philanthropic interests and goals of employees.
Research has confirmed a positive relationship between how employees perceive their company’s contributions to the community and employees’ commitment to their work.92 A 2016 study by Cone Communications revealed that 58% of Americans consider a company’s social and environmental commitments when deciding where to work.93
However, employees are increasingly looking for more than just opportunities to give through their workplace. While America’s Charities’ Snapshot 2017 report showed that 46% of survey respondents engaged in giving through their workplace, having choices in the organizations or causes to which they could donate was critical to employees. Of survey respondents, 63% cited this factor as valuable or extremely valuable in their decision to give. In fact, employees identified lack of choice in nonprofits eligible for support through their workplace as the second-biggest detractor from their donation experience.94
Employers can offer a range of charitable choices to increase employee engagement with workplace giving by asking employees about nonprofit organizations and causes that are meaningful to them. Flexibility in giving options is key: provide employees the opportunity to volunteer time inside or outside of work, or donate to a workplace-specific campaign, or match donations from employees up to a certain dollar amount. Fundraisers have the opportunity to build strong relationships with donors that also extend to the donor’s workplace.
Impact Investment Gaining Momentum
The growth in charitable giving in recent years has been bolstered by the wider range of giving options available to donors who seek to make a major impact.
One such option is impact investing, a growing movement in which investments are made in companies, organizations, and funds for the purpose of creating social or environmental impact in addition to a financial return.
Impact investing has challenged conventional wisdom that market investments should concentrate solely on achieving financial returns and that philanthropic donations should address social and environmental issues. According to a recent analysis of global impact investment market activity, assets grew by 18% compounded annually from 2013 to 2015, and investors were consistently satisfied with both financial and impact performance.95
Notable recent gifts include $500 million by Open Society Foundations to increase the private sector’s role in addressing the needs of refugees and migrants; and Benefit Chicago, a $100 million effort by MacArthur, the Chicago Community Trust, and the Calvert Foundation to mobilize nonprofit impact investments in the city.96
Donors are drawn to the flexibility of impact investing. Impact companies, organizations, or funds can be for-profit or nonprofit entities and include many sectors such as sustainable agriculture, renewable energy, microfinance, housing, education, and healthcare. Another benefit of impact investing is a commitment to measuring and reporting on the performance of investments to ensure transparency and accountability.97 With donors increasingly motivated to make a positive, lasting change, the accountability built in to the impact investing process is attractive.
Impact investing benefits from strong partnerships. Social-impact-minded companies and organizations can work with financial advisors and wealth managers to find individual and institutional investors whose philanthropic goals align with the goals of the company or organization.
Diversity in Philanthropy Growing
The population of the United States is projected to become more diverse by the year 2030, with over half of Americans expected to identify as non-white and 20% of Americans expected to be age 65 or older.98
These changes have major implications for philanthropy on both the donor and practitioner sides of the giving equation.
On the donor side, research suggests that organized philanthropy has an opportunity to increase engagement with non-white communities. The majority of all racial and ethnic groups recently surveyed by Blackbaud indicated that it was important to support nonprofit organizations. In fact, African American and Hispanic donors said they would give more to charity if they were asked more often, but felt they were solicited less frequently.99
Fundraisers have also tended to overlook unmarried, divorced, widowed, childless, and other single-individual households, which now account for nearly 30% of American households.100 Fundraisers can benefit from building relationships with and tailoring their approaches to the needs and interests of donors across society.
Some nonprofits are also seeking to increase diversity—from the workforce to the boardroom. A recent study of nearly 300 nonprofit professionals revealed that attracting and hiring diverse talent was the most pressing concern for survey respondents.101 This concern appears to be moving the needle at some organizations already: the D5 Coalition’s most recent State of the Work report revealed that the number of foundations that have reported gender and racial/ethnic data for full-time paid staff grew by 31% and 29%, respectively, between 2010 and 2015. There is still work left to do: the report also showed that people of color continue to be underrepresented in foundation staff and leadership positions, despite the U.S. workforce becoming more diverse overall.102
Given the increasingly diverse donor base, it is more important than ever to specialize messaging to ensure organizations are addressing the concerns of different demographic groups. Reaching out to different demographic groups is easiest when there is diversity within the organization’s staff and on the board; having a conversation about the needs and interests of a particular population is the best way to ensure an organization is building a relationship with diverse donors that begins from a place of mutual opportunity.